Information technology . Introduction of Information services in Banking Sector: Today we are in the era of globalization.

Multinational organizations worldwide have adopted globalization as their first strategic choice. Advancement in technology has facilitated globalization too. Information technology Services is considered as the key driver for the changes taking place around the world. Internet banking (IB) is the latest and most innovative service and is the new trend among the consumers. The shift from the formal banking to e-banking has been a 'leap' change. There has been a marked improvement particularly in the area of maintenance, storage, availability and transfer of data. The world has literally shrunk to become a "global village". IT has played a crucial role in the financial services. Internet has proved a magic wand for financial services and products, banking in particular. Banking sector has been early adopter of technology to offer latest modes for transacting business. Banks have transformed themselves and are offering services through internet. Banking environment has become highly competitive today. To be able to survive and grow in the changing market environment banks are going for the latest technologies, which is being perceived as an enabling resource that can help in developing learner and more flexible structure that can respond quickly to the dynamics of a fast changing market scenario. It is also viewed as an instrument of cost reduction and effective communication with people and institutions associated with the banking business. From computerization to networking to ATMs and now E-Banking, banks have moved up the value chain. This phenomenon of offering services through internet is referred as internet banking.

Introduction. Internet banking refers to the use of internet as a remote delivery channel for banking services. Web based or internet banking is poised to become the future face of banking services. The number of visits to the bank can be minimized effectively by operating from the internet account. Thus the number of contacts required to perform a transaction and solve a problem has been reduced through online banking. The usual branches of banks have culminated into PC networks, whereby the consumer can draw all the benefits and services of the bank at a single click of the mouse. Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Users 1,400,000 2,800,000 5,500,000 7,000,000 16,500,000 22,500,000 39,200,000 50,600,000 40,000,000 42,000,000 Population 1,094,870,677 1,094,870,677 1,094,870,677 1,094,870,677 1,094,870,677 1,094,870,677 1,094,870,677 1,112,225,812 1,112,225,812 1,129,667,528 % penetration 0.1 % 0.3 % 0.5 % 0.7 % 1.6 % 2.1 % 3.6 % 4.5 % 3.6 % 4.7 %

Table 1: Internet Penetration in India

Technology Commencement in Banking. The technological development in banking can be traced as follows:1960 - Mechanized banking introduced. 1970 - Introduction of computer based banking industry. 1980 - Introduction of computer-linked communication based banking. Advent of computer technology has created a major impact on working of banks. The computerization and subsequent development in history of Indian banks can be traced back to 1966 when Indian Bankers Association (IBA) along with exchange banks association signed first wage settlement with the unions, which accounted for the use of IBM or ICT accounting machines for inter-branch reconciliation etc. IN 1970s, SBI installed a ledger-posting machine along with a mainframe computer at selected branches. A committee on computerization and mechanisation was appointed by RBI in 1983 under chairmanship of Dr. C. Rangrajan. Its objective was to chalk out a plan for mechanization of Indian banking industry. It was recommended that computerization and installation of Advanced Ledger Posting Machines (ALPM) at branch, regional and head offices of banks will bring around a new era in banking. Narsimhan committee in 1991 paved way for reform phase in banking. Saraf committee was constituted by RBI in 1994 that recommended the use of Electronic Fund Transfer System (EFT), introduction of electronic clearing services and extension of Magnetic Ink Character Recognition (MICR) beyond metropolitan cities and branches. The rate of adoption of IT by foreign and private sector bank in the country has been significant over the last five years, which can be attributed to fierce competition and the internet phenomena worldwide. The arrival of private and multinational banks with their superior state of the art technology based services pushed the Indian banks to follow the suit by going in for the latest technologies to meet the threat of competitors and retain their customer base. Technology was the rational for bank introducing ATM and POS (Point of sales) in 1970s, telephone banking in 1980s and internet banking in 1990s . In Mumbai, Shared Payment Network System (SPNS) was set up in February 1997. It was a network of 28 ATMs with 11 banks. The ATM card was branded as

'SWADHAN'. SPNS could link with international hubs such as VISA and MASTERCARD. CITIBANK a US multinational was first bank in India to offer ATM card facility in 1985. "The last seven years have seen dramatic changes, making customers' convenience critical aspect of banking" . Indian metros are surging ahead in online banking usage. Today the delivery channel of banks include direct dial up connections, private networks, public networks etc. and the devices include telephone, Personal Computers including Automated Teller Machines, etc. Technology has thus initiated a paradigm shift from branch banking to 'Anywhere Anytime' banking. Thanks to technology, today banks are able to manage in much better way, thereby gaining greater efficiency in operations. Information Technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets. Internet has significantly influenced delivery channels of the banks. Internet has emerged as an important medium for delivery of banking products and services. The customers can view the accounts; get account statements, transfer funds and purchase drafts by just punching on few keys. The smart cards i.e., cards with micro processor chip have added new dimension to the scenario. An introduction of Cyber Cash the exchange of cash takes place entirely through Cyber-books. Collection of Electricity bills and telephone bills has become easy. The upgradeability and flexibility of internet technology after unprecedented opportunities for the banks to reach out to its customers. No doubt banking services have undergone drastic changes and so also the expectation of customers from the banks has increased greater. IT is increasingly moving from a back office function to a prime assistant in increasing the value of a bank over time. IT does so by maximizing banks of proactive measures such as strengthening and standardizing banks infrastructure in respect of security, communication and networking, achieving inter branch connectivity, moving towards Real Time gross settlement (RTGS) environment the forecasting of liquidity by building real time databases, use of Magnetic Ink Character Recognition and Imaging technology for cheque clearing to name a few. Indian banks are going for the retail banking in a big way.

The key driver to charge has largely been the increasing sophistication in technology and the growing popularity of the Internet. The shift from traditional banking to e-banking is changing customers expectations.

Banking Application Architecture.

Modes of Distribution Banks have been early adopter of technology. They were wise enough to understand the innovative mode for offering services. Private Banks played a major role in reviving the banking spirit in India. It was they who initiated the change. Today banking services can be delivered through following modes:1. Internet Banking, Web Banking, PC Banking and e-Banking Popularity of PC and easy access to internet and World Wide Web (www) has facilitated banks to use internet as a delivery channel and receiving instructions. Today all private banks and most of the nationalized banks are offering web based banking services. It is this form of banking that is generally referred as Internet Banking. 2. Phone Banking / Mobile Banking (M - Banking) There has been a rapid advancement and acceptance of mobile services in India. Penetration rate of mobiles and landlines have increased considerably. Banks have lapped up these opportunities and are offering mobile banking. Account status can be enquired just by a SMS (Short Message Service). 3. Plastic Money ATM card, Credit card, Debit Card etc. Banks have installed ATM that is connected via V-SAT. The customer can perform following operation through ATM cash withdrawal, balance enquiry, mini statement of previous transactions (last 5 to 10 transactions), order cheque books, deposit cash and obtain product information. Nowadays banks are offering value added services too, through ATMs. Punjab National Bank (PNB) is offering recharge of prepaid mobile card. Often these banks tie with other banks to use their ATM like:* HDFC and SBI; * PNB, UTI and Global Trust Bank.

In this manner, the banks increase their 'Point of Cash Delivery'. Apart from this credit, debit card have are becoming preferred medium of payment. Thus technology has created various delivery channels for bank customers. Internet Banking, Web Banking, PC Banking and e-Banking: E-banking made its debut in UK and USA 1920s. It becomes prominently popular during 1960, through electronic funds transfer and credit cards. The concept of web-based baking came into existence in Eutope and USA in the beginning of 1980. In India e-banking is of recent origin. The traditional model for growth has been through branch banking. Only in the early 1990s has there been a start in the nonbranch banking services. The new pribate sector banks and the foreign banks are handicapped by the lack of a strong branch network in comparison with the public sector banks. In the absence of such networks, the market place has been the emergence of a lot of innovative services by these players through direct distribution strategies of non-branch delivery. All these banks are using home banking as a key pull factor to remove customers away from the well entered public sector banks. Many banks have modernized their services with the facilities of computer and electronic equipments. The electronics revolution has made it possible to provide ease and flexibility in banking operations to the benefit of the customer. The ebanking has made the customer say good-bye to huge account registers and large paper bank accounts. The e-banks, which may call as easy bank offers the following services to its customers:

Credit Cards/Debit Cards ATM E-Cheques EFT (Electronic Funds Transfer) DeMAT Accounts Mobile Banking

Telephone Banking Internet Banking EDI (Electronic Data Interchange)

Benefits of E-banking: To the Customer:

Anywhere Banking no matter wherever the customer is in the world. Balance enquiry, request for services, issuing instructions etc., from anywhere in the world is possible. Anytime Banking Managing funds in real time and most importantly, 24 hours a day, 7days a week. Convenience acts as a tremendous psychological benefit all the time. Brings down Cost of Banking to the customer over a period a period of time. Cash withdrawal from any branch / ATM On-line purchase of goods and services including online payment for the same.

To the Bank:

Innovative, scheme, addresses competition and present the bank as technology driven in the banking sector market Reduces customer visits to the branch and thereby human intervention Inter-branch reconciliation is immediate thereby reducing chances of fraud and misappropriation On-line banking is an effective medium of promotion of various schemes of the bank, a marketing tool indeed. Integrated customer data paves way for individualised and customised services.

Impact of IT on the Service Quality: The most visible impact of technology is reflected in the way the banks respond strategically for making its effective use for efficient service delivery. This impact on service quality can be summed up as below: With automation, service no longer remains a marketing edge with the large banks only. Small and relatively new banks with limited network of branches become better placed to compete with the established banks, by integrating IT in their operations. The technology has commoditising some of the financial services. Therefore the banks cannot take a lifetime relationship with the customers as granted and they have to work continuously to foster this relationship and retain customer loyalty. The technology on one hand serves as a powerful tool for customer servicing, on the other hand, it itself results in depersonalising of the banking services. This has an adverse effect on relationship banking. A decade of computerization can probably never substitute a simple or a warm handshake. In order to reduce service delivery cost, banks need to automate routine customer inquiries through self-service channels. To do this they need to

invest in call centers, kiosks, ATMs and Internet Banking today require IT infrastructure integrated with their business strategy to be customer centric. Impact of IT on Banking System: The banking system is slowly shifting from the Traditional Banking towards relationship banking. Traditionally the relationship between the bank and its customers has been on a one-to-one level via the branch network. This was put into operation with clearing and decision making responsibilities concentrated at the individual branch level. The head office had responsibility for the overall clearing network, the size of the branch network and the training of staff in the branch network. The bank monitored the organisations performance and set the decision making parameters, but the information available to both branch staff and their customers was limited to one geographical location. Traditional Banking Sector

The modern bank cannot rely on its branch network alone. Customers are now demanding new, more convenient, delivery systems, and services such as Internet banking have a dual role to the customer. They provide traditional banking services, but additionally offer much greater access to information on their account status and on the banks many other services. To do this banks have to create account information layers, which can be accessed both by the bank staff as well as by th customers themselves.

The use of interactive electronic links via the Internet could go a ling way in providing the customers with greater level of information about both their own financial situation and about the services offered by the bank. The New Relationship Oriented Bank

Impact of IT on Privacy and Confidentiality of Data: Data being stored in the computers, is now being displayed when required on through internet banking mobile banking, ATMs etc. all this has given rise to the issues of privacy and confidentially of data are:

The data processing capabilities of the computer, particularly the rapid throughput, integration, and retrieval capabilities, give rise to doubts in the minds of individuals as to whether the privacy of the individuals is being eroded. So long as the individual data items are available only to those directly concerned, everything seems to be in proper place, but the incidence of data being cross referenced to create detailed individual dossiers gives rise to privacy problems. Customers feel threatened about the inadequacy of privacy being maintained by the banks with regard to their transactions and link at computerized systems with suspicion.

Aside from any constitutional aspect, many nations deem privacy to be a subject of human right and consider it to be the responsibility of those who concerned with computer data processing for ensuring that the computer use does not revolve to the stage where different data about people can be collected, integrated and retrieved quickly. Another important responsibility is to ensure the data is used only for the purpose intended.